New Opportunities in Existing CRTs
Presented by Evan Unzelman, Chief Operating Officer
Sterling Foundation Management
• Founded in 1998
 Oldest national foundation management firm in U.S.
• Support advisors
• Provider of charitable planning solutions
 Private foundation administration
 Administration of other charitable entities
 Sales of income interests in CRTs
• Offices nationwide
 Anthony Segala
New Opportunities
• Applicability
 Existing clients
 Prospective clients
 Attorneys and CPA networks
Charitable Remainder Trusts
• Tax-planning vehicle
 Defer capital gains tax on appreciated assets
 Income tax deduction
 Diversify concentrated position
• Client outcomes
 Tax benefits garnered early
 Future benefit rooted in income from trust
The Problem
• Irrevocable
 Client loses control (i.e., liquidity) of donated assets upon
creation of CRT
 But circumstances change
• Taxation
 Worst in, first out
 Deferral works against client if tax rates rise
• Mortality Risk
 Exposure to financial risk of premature death
The Solution
1) Sell CRT interest
 Maximizes value from CRT on present value basis
 Eliminates tax and life expectancy risks
 Provides lump cash payment
2) Reinvest proceeds
 Annuities
 Life insurance
Tax & Legal Considerations
• Income interest in a trust is a capital asset
 Rev. Rul. 72-243, 1972-1 C.B. 233
 PLR 2007390041
• State law governs sale
 No legal barriers to sale of CRT income interest
 Trust Agreement
Case Study
• Background
• Current situation
• Outcome
Client Situations to Look For
• Change in circumstance
 Financial
 Personal
• Risk aversion
 Tax
 Mortality
• Frustration with CRT performance
• NIMCRUTs
Business Development Opportunities
• Attorneys and CPAs
 No knowledge of sale option
 Cursory knowledge of sale option
 They want to know about it
• Clients
 Most clients who have CRTs are unaware of sale option
 Bring these clients a solution their existing advisors aren’t
Evaluations
• Anthony Segala, SVP, Western Region
 (310) 384-9406
 [email protected]
• Required information
 Ages of income beneficiaries or remaining term
 Payout rate
 Trust value
Disclaimer
Sterling Foundation Management does not provide
tax or legal advice, and nothing in this presentation
should be construed as such. Any information or
analysis provided is believed to accurate but is not
guaranteed or warranted.